The OECD’s ‘harmful tax competition’ project: Is it international tax law?

On 13 March 2009 the Organisation for Economic Co-operation and Development (OECD) announced that Austria, Luxembourg and Switzerland had agreed to introduce laws to allow for the exchange of information on tax evaders. The OECD has been actively trying to protect the national tax bases of its member states and this has now become an imperative with the global financial crisis and government deficits. The OECD’s harmful tax competition project has been actively pursued for the past 12 years and appears to be receiving worldwide acceptance. On this basis it can be strongly argued that it now has the status of ‘soft’ international law and appears to have all of the hallmarks of being part of the range of OECD initiatives that have been accepted as constituting international taxation law; such as the transfer pricing rules, Controlled Foreign Corporation (CFC) rules, and the model double tax agreement, to name just a few. This paper will contend that the harmful tax project has not only become part of international taxation law but as a result, the major tax havens and offshore financial centres (OFCs) have now agreed to comply with the OECD’s harmful tax competition project and to provide details of non-resident taxpayers using their financial system for tax avoidance and tax evasion purposes.